Hindalco Industries share price plunged on Thursday after the company unveiled an $8-billion capex plan over the next five years. Shares of Hindalco Industries fell as much as 3.58% to touch an intraday low of Rs 577.95 on BSE. The stock, however, has rallied around 582% from its March 2020 low and is expected to rally 25% going forward, according to domestic brokerage firm Motilal Oswal Financial Services. “Hindalco is one of the lowest-cost producers of alumina at its Utkal refinery. The same has been fully ramped up, driving costs down further. The company is expanding both downstream and upstream to raise its aluminum capacity as well as the share of value add products, which will eventually reflect in an improved EBITDA margin,” it said.

Hindalco stock outperforms benchmarks

Hindalco stock, the stock of the largest aluminum player in India, has slipped 8 per cent in the last two days on profit booking. The stock has corrected 9 per cent from its record high of Rs 636 touched on Tuesday, March 29, 2022. However, in the past three months, Hindalco has outperformed the market by surging 22 per cent as compared to a mere 0.78 per cent rise on the S&P BSE Sensex. In the last one year, the stock has zoomed 77 per cent, as against a 19 per cent rally on the benchmark index.

Motilal Oswal: Buy
Target price: Rs 750; Upside: 25%

The brokerage firm retains ‘buy’ rating on the stock with a target price of Rs 750 per share. “The key downside risk to our call is a slowdown in China. A sharp reduction in LME prices will impact Hindalco’s capex plans adversely,” it said.

“Global supply shortage and strong demand prospects have pushed global aluminum prices to healthy levels. With its recently announced growth capex plan, over a medium to longer term horizon Hindalco is poised to benefit from the same. With respect to the capex plan, for both Novelis and Indian operations, some projects are in the appraisal stage and are likely to get requisite approvals in due course”, ICICI Securities said in a note.

Meanwhile, CLSA has downgraded Hindalco to outperform from a Buy rating with a target price of Rs 695 per share. They said, “Novelis’s organic capacity expansion has come in after more than a decade and its upstream expansion hinges on renewable power availability”.

JP Morgan has also downgraded their long-standing Overweight to Neutral. They believe that Hindalco’s balance sheet has materially improved but it has earnings leverage to higher LME remains. They believe the risk-reward is not attractive as the downstream business in Europe and the US could be negatively impacted if LME prices sustain above $3500/t. They say that the large growth CAPEX announced means HNDL needs both higher LME aluminium and high Novelis margins to sustain at elevated levels to fund the CAPEX.

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